Silicon Valley Bank required some clients to agree to exclusivity clauses, disabling them from diversifying where they held their money, SEC records show.
Silicon Valley Bank had exclusivity clauses with some of its clients, limiting their ability to tap banking services from other institutions, SEC filings show.
The contracts, which made it impossible for those clients to safely diversify where they kept their money, varied in language and scope. CNBC has reviewed six agreements that companies signed with SVB regarding financing or credit solutions. All required the companies to open or maintain bank accounts with SVB and use the firm for all or most of their banking services.
Those arrangements are particularly problematic now that SVB has been seized by federal regulators after last week’s run on the bank. The Federal Deposit Insurance Corporation only insures up to $250,000 in deposits for each client, leaving SVB’s customer base, which is heavily concentrated in tech startups, fearful that millions of dollars in operating funds would be locked up for an indefinite period of time.
Banking regulators devised a plan Sunday to backstop depositors with money at SVB to try and stem a feared panic across the industry after the second-biggest bank failure in U.S. history.
As part of a multi-million dollar financing agreement with online-lending platform Upstart Holdings, SVB required that the company maintain all of its “operating and other deposit accounts, the Cash Collateral Account and securities/investment accounts” with SVB.
